Shanghai Clearing House Enables Support for Digital Yuan Settlements
The Shanghai Clearing House, renowned as Asia's foremost counterparty clearing institution, has taken a major stride by introducing support for payments made with the digital yuan. This strategic move not only facilitates the seamless settlement of bulk commodity transactions but also aims to promote the Chinese Central Bank Digital Currency (CBDC) on international markets.
Digital Yuan for Bulk Commodities Payments
The Shanghai Clearing House, one of the largest counterparty and clearing companies in Asia and the world, recently introduced support for operations and settlements using the Chinese Central Bank Digital Currency (CBDC), the digital yuan for operations and settlements. As reported, customers of the institution can now settle bulk commodity payments using the digital yuan, all without incurring any additional fees, at least for the time being.
Experts anticipate that the adoption of the digital yuan within a large clearing house will enhance efficiency in managing commodity settlements. Dong Dengxin, Director of the Finance and Securities Institute at Wuhan University of Science and Technology, expressed his optimism, stating,
"The launch of these services will enhance the security, speed, efficiency, and cost-effectiveness of cross-border settlement for financial institutions and service providers handling bulk commodities."
China, ranking as the world's second-largest commodities importer in 2021, with a staggering 12.6% share valued at USD 2.68 trillion, continues to play a vital role in the global market. Its pursuit of utilizing the digital yuan further solidifies its economic prowess, trailing only behind the United States, which imported commodities valued at USD 2.93 trillion during the same period.
Internationalization of Digital Yuan
This move by the Shanghai Clearing House is a natural extension of the People's Bank of China's efforts to position the digital yuan as a leading cross-border transactional currency. With successful tests in retail environments, this latest initiative expands the digital yuan's reach and promotes its internationalization, providing the world with a reliable clearing system.
Dong added:
"The move will also facilitate the internationalization of the Chinese currency, and provide the world with a trusted clearing system."
Additionally, the digital yuan is being put to the test in Hong Kong, where it is being integrated into the Faster Payments System. This integration aims to allow Hong Kong citizens to conveniently make payments with the digital yuan when in mainland China. The Chinese autonomous region of Guanxi has plans to unveil the digital yuan at the upcoming China-ASEAN Expo event, to showcase its potential as a settlement currency for cross-border trade with other Association of Southeast Asian Nations (ASEAN) countries.
Earlier this year, the city of Changshu, home to over 1.5 million residents, made headlines as the first city to adopt the digital yuan for salary payments. The digital yuan is now being used to pay city employees, including public servants, government officials, school teachers, medical professionals, and state company staff.
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